[Editor’s Note: This is a guest post by Liz Jacob, a writer and editor living in New York. She is a writer for Biz2Credit, the #1 online credit resource for small business loans, business loans for women, equipment financing, working capital and other funding options. Biz2Credit has secured $800 million in funding for small business owners in the U.S. since 2007. Follow @biz2credit on Twitter and Facebook for company and industry updates. Enjoy the post!]
You’ve been thinking about starting a business for years. You’ve been plotting out the specifics for months. You’ve considered all the factors involved—ideological, personal, and financial.
But do you have it in writing?
Creating a business plan is essential to the success of your loan application. You may think that you’re fully prepared to launch your business, but lenders won’t know that until they’ve seen a completed business plan. Follow these steps to produce a business plan that’s sure to win over any lending executive:
1. Describe your product or service.
What will your business do? What product or service will it provide? What problem or problems will it solve? Also known as an executive summary, a description of the product or service that your company plans to offer will provide the basis for your business plan. The key is to emphasize the distinctiveness of your company’s mission. Readers of your business plan want to know that your company offers a product or service that is either completely new or is a significant improvement upon existing products or services. Imitators need not apply.
2. Assess your market.
Whom will your business serve? Which demographics will be potential consumers of your product or service? Will your business focus on local, regional, national, or international markets? Who constitutes your target market? Finding the answers to these questions will require some serious research. Consumer reports and existing survey data are a great place to start, but you might want to consider offering your own surveys to better gauge the wants and needs of your market.
Analyzing survey data will help you to hone in on your target market, but that’s only half the battle. Once you’ve zeroed in on your ideal business demographic, it’s essential to figure out which of your competitors are already operating in your market space. Lenders want to see that after having assessed the strengths and weaknesses of your competitors, you still believe that your business can and will come out on top.
3. Structure your business.
How will you organize your business? Who will comprise your management structure? How many employees (if any) will you hire? As your business grows, how will the organization of your business change? When you’re still running your business out of a coffee shop, it’s admittedly difficult to maintain formal organizational structures. But lenders respect business plans that present detailed management structures. By clarifying who’s in charge, you assure lenders that you know how to run a business.
4. Market your business.
How will your promote your company’s product or service? What form will your marketing campaign take—print, digital, radio, or TV? Specifically describe the steps that your company will take to convince your target market to purchase or use your product or service. If your business is attempting to enter an existing market, it’s critical to demonstrate how your marketing campaign will lure customers away from your competitors and toward your business. Articulating a clear marketing strategy shows lenders that you’re prepared to fight for your company’s market share.
5. Predict your business’ financial future.
Does your business have a shot at financial success? Making financial projections in your business plan is your chance to prove it. It’s important to be honest: acknowledge all of the risks involved in your venture, including weaknesses in your personal financial history. But once you’ve owned up to your business’ potential difficulties, you need to predict its industry performance. Use data from the Risk Management Association (RMA) to see how your predictions stack up against industry averages. Finally, demonstrate how your company will reach its financial goals, accounting for revenues, expenditures, and potential small business loan funding.
At the end of the day, the goal of any business plan is to convince potential lenders and investors of your company’s future success. Show them what makes your business venture uniquely profitable, and make sure they see that you have the dedication, talent, and entrepreneurial savvy to pull it off.
[CC photo credit to Plantoo47]